Subject Digester

La Compania Maritima v. Munoz (1907)

Willard, J.

Under what topic: To be liable pro rata for partnership debts

Plaintiff-appellant: La Compania Maritima

Defendant-appellees: Francisco Munoz, et al.

Synopsis: Francisco Munoz, Emilio Munoz, and Rafael Naval formed an ordinary general commercial partnership,
Francisco Munoz & Sons, for the purpose of carrying a mercantile business. Francis was a capitalist partner while
Emilio and Rafael were industrial partners. Plaintiff La Compania Maritima brought an action to recover a sum of
money against the partnership and the partners in their own individual capacity. Emilio and Rafael were absolved
from liability.
In their brief, it is claimed that it is not an ordinary general commercial partnership while in their article
of partnership it is expressly stated that they have agreed and do form an ordinary general commercial
partnership. The object of the partnership is purely mercantile and all requirements under the Code of Commerce
were complied with. The articles of partnership were even recorded in the mercantile registry of Albay. There is
no doubt that there is a partnership.
Appellees claimed that Emilio is not a partner because 1) he contributed nothing to the partnership, 2) he
has no salary and 3) he is excluded from the management. The Supreme court in upholding that he is a partner
stated that 1) he contributed as much as Rafael, 2) he receives a salary, the only difference between him and Rafael
is that the latter was entitled to a fixed salary while he is not and 3) that the partners can validly do the exclusion
from management in accordance with the provision of Art. 125 of the Code of Commerce.
Doctrine: In an ordinary general partnership an industrial partner is liable to third parties for debts and
obligations of partnership. The construction of the law should be avoided which would enable two persons, each
with a large amount of private property, to form and carry on a partnership and, upon the bankruptcy of the latter,
to say to its creditors that they contributed no capital to the company but only their services, and that their private
property is not, therefore, liable for its debts.
It should be noted, however, that the execution of the judgment should not issue against the private
property of the partners until the property of the partnership is exhausted.

Facts: Francisco Munoz & Sons and Francisco Munoz.

 March 1905: Defendants Francis, Emilio, and
Rafael formed an ordinary general mercantile
partnership under the name of Francisco
Munoz & Sons for the purpose of carrying a
mercantile business in Albay. Francisco was a
capitalist partner and the two were industrial
partners.
 La Compania Maritima brough this action in
the CFI of Manila against the partnership and
against the partners in their individual
capacity to recover a sum of P26,828.30.
 CFI: Emilio and Rafael were acquitted.
Judgment was rendered only against
Hence, this appeal.
Appellees’ Defense:
 It is not an ordinary, general partnership.
 That Emilio is not a general partner because:
o He contributed nothing to the
partnership.
o He had no yearly or monthly salary
unlike Rafael who was receiving a
fixed salary of P2,500.
o He was entirely excluded from the
management of the business.
SC:
 Subject Digester

 Emilio is a general partner.  Article 141 relates exclusively to the

o He contributed as much as Rafael.
o He was receiving a salary too, but
Rafael’s was fixed.
o Emilio excluded himself from
management for he signed the articles
of partnership the terms of which
management was expressly conferred
by him to the others. Art. 125 and Art.
132 of the Code of Commerce
recognize this right.
Issue/s - Holding:
Knowing now that Emilio is a general partner, can he
be held liable to third persons for the obligations
contracted by the partnership despite his status as an
industrial partner in an ordinary, general mercantile
partnership? YES!
Ratio:
 Court’s basis:
Art. 127 of the Code of Commerce
All the members of the general co-partnership,
be they or be they not managing partners of
the same, are liable personally and in solidum
with all their property for the results of the
transactions made in the name and for the
account of the partnership, under the
signature of the latter, and by a person
authorized to make use thereof.
 Appellees’ basis:
settlement of the partnership affairs
among the partners themselves and has
nothing to do with the liability of the
partners to third persons; that each one of
the industrial partners is liable to third
persons for the debts of the firm; that if he
has paid such debts out of his private property
during the life of the partnership, when its
affairs are settled he is entitled to credit for the
amount so paid, and if it results that there is
not enough property in the partnership to pay
him, then the capitalist partners must pay him.
 In relation to this, the Supreme Court noted
that partnerships under the Civil Code
provides for a scenario where all partners are
industrial partners (like when it is a
partnership for the exercise of a profession).
In such case, if it is permitted that industrial
partners are not liable to third persons then
such third persons would get practically
nothing from such partnerships if the latter is
indebted.
Dispositive:
Judgment of the court below reversed and judgment is
ordered against all of the respondents for the sum of
P26,828.30. However, execution of such judgment
shall not issue against the private property of the
defendants Francisco, Emilio, and Rafael until the
property of the defendant Francisco Munoz & Sons is
exhausted.

Art. 141 of the Code of Commerce

Losses shall be charged in the same
proportion among the partners who have
contributed capital, without including those
who have not, unless by special agreement the
latter have been constituted as participants
therein.

 The controlling law is Article 127. There is

no injustice in imposing this liability upon the
industrial partners. They have a voice in the
management of the business, if no manager
has been named in the articles; they share in
the profits and as to third persons it is no more
than right that they should share in the
obligations.